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April 10, 2008

Mixed job market signals

The nation lost jobs in February, but the unemployment rate in that month actually fell. If we had fewer jobs, the unemployment rate should rise. What's going on here? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well you're confused, and I think you've got a lot of company, because this can be confusing because exactly what you said appears to make sense. If we lose jobs, there should be more people unemployed, and, therefore, the unemployment rate should go up. Well, here's what can actually happen. We lose jobs and in order to be, however, counted as unemployed, those people who lost those jobs, they have to be actively looking for work. They have to go on job interviews; they have to be contacting employers. If they don't, in the statistics, they are actually counted, not as employed certainly, they're not even counted as unemployed. They are just not even counted. They are what we call discouraged workers, who have really left the labor force. And, therefore, they don't figure into the unemployment statistics. So what can happen is that we have a decrease in jobs, we have a fair number of those people who lost their jobs simply give up looking for work. So they are not even counted as unemployed. And, therefore, the unemployment rate can either stay the same or can actually go down. So I think this is why it is important especially when we are in this transitional period, when we're, for example, going from growth to a recession or vice versa, to not really pay a lot of attention to the unemployment rate but really pay more attention to simply the number of jobs and whether they are going up or whether they are going down."

Posted by Dave at April 10, 2008 08:25 AM